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‘Scale in context’ - IMX attempts to change media industry dynamics

21-February-2007
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‘Scale in context’ - IMX attempts to change media industry dynamics

They did it in China and now Publicis Groupe Media (PGM) has done it in India as well. With the consolidation of the buying, or negotiations as some officials like to term it, unit of its media products in India -- Starcom MediaVest Group (SMG) and ZenithOptimedia (ZO), PGM is placing importance on ‘scale’ or volumes. PGM officials state that this consolidation gives them a total billing of Rs 1500 crore and that, this makes PGM the second largest player in the Indian market.

For the record, according to industry estimates, the largest player in the market is WPP (with a billing of almost Rs 3000 crore) and the likes of Madison are also in the Rs 1200 crore upwards mark.

The PGM move raises many questions. To begin with, given that with the exception of buying, SMG and ZO would be competing on the other counts, how does PGM propose to maintain the ‘frienemy’ relation going? Citing the China experience, Jack Klues, Chairman, Publicis Groupe replied, “Both these entities have separate reporting orders and different structures globally, and this consolidation doesn’t change that. We have mixed experiences in China -- there are some issues but nothing that cannot be managed and the results have been very positive.”

He explained that from clients like P&G and Unilever to agencies, and hence PGM competitors, like WPP, consolidation of resources to drive scale and negotiate there from is not unheard of. By his own admission, when the model was launched in China, it was reactive to GroupM and with CTG in India, the case doesn’t appear to be too different here either.

However, D Sriram, CEO, SMG, Asia corrects this perception stating, “Scale may allow us to enter discussions with some command but pricing isn’t the issue or the reason why this consolidation has taken place. Media owners and clients are looking at customised solutions and the next level of services in business today and with this model, we are in a better position to deliver that.”

Is there any example of what can be offered in this new structure that the earlier structure couldn’t offer? The officials take their time in replying to this. One point they make here is that the new model will allow a change in traditional paradigms on issues like pricing, traditional measurement systems to new modes that would help grow media as a segment.

Klues stated that importantly, in a consolidation of this nature, while bundling can be a tendency, there is the scope of cross platform deals and that this would always be based on ideas. He believes that this model can only mean a more energetic work environment for the media industry --- the whole is greater than the sum of its parts.

PGM agencies may have won themselves buying benefits with this consolidation but they are also in the face of challenges like handling conflict clients of the two agencies, managing and creating talent that can handle the processes that IMX promises and above all, giving the industry examples of innovations that come with scale.

It does remain to be seen how the PGM agencies in India leverage this consolidation to fight the pricing or the “idea” game in the Indian market. Since the model is a nascent one, how it develops for these agencies that would work together and against each other, also promises to be an interesting watch.

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